THE SOUTH SEA COMPANY 367
(x)
THE SOUTH SEA COMPANY
The law of Spain excluded foreigners from trading with Methods oj
her colonies. To evade the prohibition, trade to the Spanish ^^fie
West Indies was conducted in the seventeenth century Spanish
by English merchants residing at Cadiz, who sent outcolon**s'
English goods in Spanish ships and under colour of Spanish
names. There were three methods of trading *. One was
to send goods ' coloured' in the names of Spaniards:
another was to sell goods to Spaniards, receiving payment
upon the return of the galleons, the risks of the voyage
being borne by the seller: and the third was to lend
money to Spaniards who were to repay it only if the
galleons came home safely. This system of indirect trade
was handicapped by heavy duties imposed on commodities
entering Spain—English goods paid 23 per cent, plus an
additional duty upon registration at Seville, and the goods
brought back from the West Indies paid 4 to 8 per cent.2.
A proposal for the erection of a company to trade direct
with the Spanish West Indies had been mooted under
James I.3, but it proved still-born. The War of the Spanish
Succession afforded a favourable opportunity for its revival.
The prospect of a French dynasty ruling in Spain brought
to the front the problem of direct access to the Spanish
dominions in America; while the financial difficulties
created by the war made the solution of the problem a
matter of interest to the Government, There was a large
floating debt, and in accordance with the ideas of the time
it was proposed to fund it by means of an expedient similar
to that which had already brought into existence the Bank
of England and the New East India Company4. The State
creditors were incorporated, under an Act of Parliament
passed in 1710, in a joint-stock company upon which was
conferred the monopoly of the English trade with the
1 Hist. MSS. Comm. Portland, viii. 153-154.
a Ibid. v. 51.
s Macpherson, Annals of Commerce, iii. 18 (1624).
4 Supra, p. 310, and infra, vol. iii. 240.